Building Entrepreneurship

Posted on November 27, 2016

Nepal’s Performance in Enterprise and Business Facilitation

-This article was originally published by Ashesh Shrestha in The Himalayan Times on November 27, 2016.

Economic growth and prosperity is only possible when the slope of the economic activities rises. This slope is directly proportional to the volume of entrepreneurial activities. Here, entrepreneurial activities are to mean people from all over the country undertaking different business ventures, taking risks with the aim of earning profit while also contributing to society. The world over, we can see enthusiastic entrepreneurs who actively engaged in innovation and brought to life products that we could have only imagined decades ago.These innovative products managed to carve markets for themselves and have in recent years, been in a large part responsible for economic growth of certain countries.

Current situation and development

Since it is apparent that entrepreneurship is one of the most essential factors for economic growth of a country, facilitating entrepreneurship by making it easy for businesses to enter markets is of crucial importance.The Doing Business Report of the World Bank which measures the ease of doing business ranked Nepal 107 out of 190countries in 2017. It is obvious from this alone thatNepal has not been faring well in the index. From the initial task of starting a venture and engaging in business operation to winding the company up, every step is very arduous – requiring to meet various legal and bureaucratic compliances. The cost of starting a business in Nepal is as high as 26.1 percent of the GDP per capita. However, a number of steps are being taken to improve the business environment in Nepal.

The government is drafting new bills including but not limited to industrial enterprises, foreign investment, labor, and banks and financial institutions. The government seems to have realized the insufficiency in the previous editions of these acts and has decided to reform them. The new billshave also opened up more areas where entrepreneurs can operate new enterprises. For example, the new Foreign Investment bill has opened up provisions for private equity and venture capital, and grants on accessing international capital markets. This will openup new avenues for foreign entrepreneurs and investors. The new provision of private equity and venture capital can solve problems of access to finance to small innovative businesses. Furthermore, the Ministry of Industry seems to be keen on improving the business climate in the country, about which they have been publicly vocal time and again. While the government did try to ease business registration by introducing an online system for the same, a lack of provision for electronic payments and that relating to digital signature proved to be rather problematic.

Only recently we saw an end to the week-long worldwide celebrations of entrepreneurs, innovators and job creators termed as the Global Entrepreneurship Week.Nepal also engaged in these celebrations by hosting panel discussions among start-ups, established business communities and the state. While these short-term celebrations do help actors involved sit together and scrutinize each other’s problem areas, they will mean little if solutions deliberated on are not put on the policy map, or at least given more consideration from stakeholders.

Aspects that need contemplation

Improving business climate is synonymous to a well-eyed scrutiny of current environment and discussing solutions for problems found. While Nepal is on its way to reforming legal changes for enabling a better climate,major policy changes regarding facilitation of businesses and enterprises in federal structure has so far been neglected. A very large part of federalism debate has only revolved around mostly political aspects of demarcation and structure of the state whileno concrete preferences have been given to techniques by which enterprises could be facilitated. Even the potential structure of government agencies administering business activities have not beenwell defined.The newly drafted bills specify little regarding the devolution of these authorities. This particular side is something that must be thought about judiciously.

One of the many things that can be done regarding business facilitation in a federal structure is giving enough power to the provincial authority regarding administration of works related to registration, operation and closing of the business within their jurisdiction. Thiscan create competition between the sub-national jurisdictions for attracting businesses and enterprises into their jurisdiction, ultimately easing the business climate.In order to solve the problem of online registration,introduction of an online payment system and clear policy concerning digital signatures should be forwarded.

Building entrepreneurship is imperative for job creation, innovation and overall growth of an economy. Countries which have created proper grounds for development of innovative entrepreneurs are the most developed countries in the world. Nepal is still one of the weaker performers on the same forte. Althoughrecent developments in enterprise facilitation and development is really commendable, there are still a lot of things to do if Nepal is to move towards the road to prosperity.